The Institutional Investors Group on Climate Change (IIGCC) and the Transition Pathway Initiative Global Climate Transition Centre (TPI Centre) have launched a net-zero standard for banks.
The standard, which will evolve as new policies emerge, sets out investor expectations for banks on the transition to net zero, and is built around 10 areas.
These are 1) bank commitments; 2) targets; 3) exposure and emissions disclosure; 4) emissions performance; 5) decarbonisation strategy; 6) climate solutions; 7) policy engagement (lobbying); 8) climate governance; 9) just transition; and 10) annual reporting and accounting disclosures.
The standard is designed to complement the net-zero investment framework, and to support constructive engagement with banks on ongoing climate commitments.
Alongside the standard, the TPI Centre has launched a net-zero banking assessment framework, with the IIGCC and Ceres.
This is a set of measurable indicators, sub-indicators, and scoring guidance for assessing the alignment of banks against the goals of the Paris Agreement.
The TPI Centre will use the net-zero banking assessment framework to assess 26 global banks across Europe, North America and Asia annually, with the inaugural assessments due for publication in summer 2023.
As well as highlighting areas for improvement, the assessments will capture the progress many banks have made to date, and the ongoing implementation of their stated climate-related policies and plans.
The final standard and net-zero banking assessment framework follows multiple rounds of investor consultation and a pilot study in 2022.
The pilot study found that while banks have stepped up in committing to net zero, disclosure on implementation of those commitments is less consistent. It is the same banks for which the TPI Centre will publish the inaugural assessments later this year.
Stephanie Pfeifer, CEO at the IIGCC, said: “Due to the nature of their activities, banks have an outsized role to play in whether the global economy successfully decarbonises or not.
“For investors with net-zero commitments, many of which will include investments in banks, it will therefore be vital to engage with banks over their transition plans in order to fulfil their own commitments.”
Carla Jouavel, deputy director at TPI Global Climate Transition Centre, added: “Aligning investments with the aim of limiting global temperature rise to 1.5˚C above pre-industrial levels remains critical for the banking sector.
“The TPI Centre’s net zero banking assessment framework provides a robust tool for assessing banks’ preparedness in transitioning to net zero, and how well their financing activities align with the goals of the 2015 Paris Agreement.”